Barter bookkeeping: A tenacious system

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Dale L. Flesher
UNIVERSITY OF MISSISSIPPI
BARTER BOOKKEEPING: A TENACIOUS SYSTEM
Abstract: Since accounting develops to meet the needs of its environment, the same systems may not be used in all parts of the country at the same time. A sys-tem of barter and credit bookkeeping was common in the U. S. during the 1700's, but began to diminish from the civilized parts of the country during the early 1800's. However, the barter-credit system continued to be used in some rural areas well into the 20th century. These 20th century barter-credit records were not antiquated. The needs of management were little different than those of other storekeepers of a century and a half earlier. Thus, the same accounting methods were sufficient to meet these needs.
The methodology of accounting develops to meet the needs of the economic environment in which it operates. The business en-vironment of the United States has not been identical in all places at a given point in time. Thus, an accounting system that was quite antiquated in one section of the country was still useful in another area. A system of barter and credit bookkeeping was very common throughout America during the 1700's but began to be replaced by a more modern system in the early part of the 1800's.
Barter bookkeeping used a partial system generally consisting of a day book where credit transactions were recorded on a mem-orandum basis. Later these entries were posted to a combined accounts receivable and accounts payable ledger. This ledger used elements of a double entry system by recording claims against cus-tomers as debits and receipt of payments as credits. Vendors' ac-counts also used the debits and credits correctly. The system was incomplete and not a true double entry system, however, because other assets and liabilities and owners' equity were not recorded and no attempt was made to accumulate revenues and expenses.
The double entry system was well known in the United States in the 1700's as is attested by the many textbooks in circulation on the Italian method of bookkeeping. In the early part of the 19th century, as business ventures became more complicated, the barter book-keeping system gradually gave way to a more complete system of true double entry. One accounting historian made the following ob-servation: